From the desk of Willie Delwiche.

It’s no secret that we’ve been looking for evidence of improving breadth that would support last month’s breakouts in the small-cap and mid-cap indexes and provide fuel for a rally into the first quarter of next year. Instead we are finding evidence of the opposite - that rally participation is struggling to robustly expand. That’s the message when we look beneath the surface of the NASDAQ. The NASDAQ composite closed at a new high on the same day that the new low list rose to its highest level since March. March 2020. Another way to look at it (shown on the chart below) is that never in my career have I witnessed more NASDAQ stocks making new 52-week lows on the same day that the NASDAQ Composite made a new 52-week high. I don’t know if it will be the case this time, but when the market is heading for trouble,  new low lists crescendo in size. This is not unlike tremors before an earthquake.

From the desk of Steve Strazza @Sstrazza

Energy has been by far the best-performing sector over the trailing 12-month period.

In October, we witnessed a handful of energy stocks and industry ETFs break higher from bases and reclaim their summer highs.

Without a doubt, these are bullish developments for the space. 

But over the trailing month, energy has lost that leadership position and has actually been the worst-performing sector in the market. 

Today, we’re seeing a lot of the upside resolutions from last month undercut their former highs and turn into failed breakouts.

So, where do we go from here?

When we look at the relative trends in the energy sector, we get a much different picture than what we’re seeing on absolute terms. Most of them never resolved higher like their absolute trends and simply remain messy, with prices stalling at the upper bounds of their basing patterns.

If we’re going to see sustained outperformance from energy stocks, we need to see them resolve higher relative to the broader market. 

This is the video recording of our November 19, 2021, All Star Charts Crypto Weekly Strategy Session.

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Over the past few weeks we’ve seen a handful of major indexes, like small and mid-caps, resolve higher and kick off a fresh up leg. But breadth has really cooled off since then, as participation has been declining despite the major averages rallying.

This week, we’re finally seeing that weakness show up at the index level -- particularly from SMIDs and cyclicals.

When we were reviewing our breadth charts, we noticed the deterioration in energy sector internals has been particularly bad. Not only is breadth not confirming the new highs from energy stocks… but there are actually some pretty ugly divergences in our new high indicators. 

Energy stocks are currently vulnerable, sitting just above their breakout level at former resistance. Considering the lack of support from internals, this group is on failed breakout watch.

Let’s take a look under the hood and discuss what we’re seeing.

Energy has been coiling in a continuation pattern above its year-to-date highs around 56 for over a month now. You can see this in the upper pane of this chart:...

This is the video recording of the November 18th Weekly Town Hall w/ Willie Delwiche

11/18/21 2:30 PM ET

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

On Tuesday night we held our November Monthly Conference Call, which Premium Members can access and re-watch here.

In this post, we’ll summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the desk of Willie Delwiche.

Last week, I wrote about how stillness can be the riskiest decision. 

This week, I want to discuss how periods of stillness can be part of the best approach. 

This idea brings to mind my favorite bird: the Great Blue Heron. If I have a spirit animal, this would be it.

Over the last few days, we've made our thoughts pretty clear regarding the broader crypto market over long and short time horizons.

So let's have a quick summary:

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

TIPS versus Treasuries is one of the most important charts we’re watching right now, as it's hitting its highest level since early 2013. Relative strength from TIPS hints that investors are positioning themselves for a sustained surge in inflation.

This makes sense given both the five- and 10-year breakeven inflation rates have reached their highest levels in more than a decade. 

As investors react to signs of impending inflation, many cyclical stocks that benefit from higher rates are catching a bid. A great example of this is the Metals and Mining ETF $XME.

Let's take a look!

Below is a chart of XME overlaid with the TIPS versus Treasuries ratio and correlation study in the lower pane:

If investors are anticipating higher inflation in...

From the desk of Willie Delwiche.

Key Takeaway: Bullish sentiment is on the rise. The bears may be reluctant to leave the party, but the bulls squarely outnumber their counterparts. The AAII survey shows bulls exceeding bears by two-to-one, and the II bull-bear spread is back within a high optimism zone. At the same time, options markets reveal that volatility and fear are being replaced by complacency. Though optimism has risen sharply during the past few weeks, current levels do not present risk. However, problems may arise when the lofty expectations associated with the sentiment backdrop are not met.

Sentiment Report Chart of the Week: Risk On Buffett Lacking Calories

While risk appetite has returned (NASDAQ and CBOE equity options volume have turned sharply higher), this is not translating into clear strength from higher risk (e.g. risk on) parts of the market. To the extent that our risk on / risk off ratio has been moving higher, it has more to do with risk off weakness than because of risk on...

From the desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as a market of stocks.

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions... but there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club. We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports. Now, we're also highlighting lagging stocks on a recurring basis.

Welcome to the...